MCHP - Microchip stock gains on FQ2 earnings beat and guiding outlook above consensus

• Microchip ( NASDAQ: MCHP ) shares edging higher after FQ2 earnings smashed the consensus mark on Thursday, with revenue growth of ~26% Y/Y and net income growth of ~39% Y/Y.
• Adjusted gross margin rate was 67.7% vs. 65.3% year ago.
• Adjusted operating margin rate was 46.9% vs. 42.5% year ago.
• Cash flow from operations of $793.2M.
• The company paid down $264.9M of debt in the quarter.
• The company also announced sequential dividend hike of 9% to $0.328 .
• CEO comment: "Amid changing economic conditions and ongoing global supply disruption, our business remains strong as we exited the September quarter with the highest unsupported backlog ever. While we see encouraging signs of the supply chain loosening, many of our technology corridors remain constrained despite the careful capacity ramps we continue to implement. As such, we expect capacity to remain tight for specialized, trailing-edge technologies throughout 2022 and into 2023. Our focus on Total Systems Solutions and semiconductor industry megatrends is creating ample growth opportunities as our design win and new products funnel remains healthy. "Our backlog for the December quarter remains strong, and we have more capacity improvements coming into effect. Demand continues to outpace supply, and we have considerable backlog requested by customers in the December quarter that we currently cannot fulfill until later quarters, despite growing capacity from last quarter. Considering these factors and the economic backdrop, we expect net sales in the December quarter to be up between 3% and 5% sequentially, and we expect to grow sequentially again in the March quarter. At the mid-point of our guidance for the December quarter, net sales would be 22.7% higher than the year-ago quarter."
• FQ3 Outlook : Net sales of $2.135B-$2.177B vs $2.14B consensus; Non-GAAP EPS of $1.54-$1.56 vs. $1.54 consensus; Adjusted gross margin rate of 67.8% to 68.0%; Adjusted operating margin rate of 46.9% to 47.3%; Adjusted net income of $855.6M to $868.4M; Inventory days in the December 2022 quarter are expected to be in the range of 143 to 147 days, compared to 139 days on September 30, 2022; Capital expenditures to be between $105M and $125M.
• Capital expenditures for all of fiscal 2023 are expected to be between $500M and $550M.

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